Income Tax Officials Target Wealthy Indians with Foreign Properties
Wealthy Indians with properties in Switzerland and Portugal are under the scanner of income tax officials, who are seeking to uncover undisclosed foreign assets and income.
Income TaxWealthy IndiansForeign PropertiesSwitzerlandPortugalReal Estate NewsAug 14, 2024
According to sources, real estate investments by HNIs outside India are currently under the I-T department's scanner. The taxman has issued thousands of notices seeking information on assets held abroad and has conducted survey action, which has revealed a sudden rise in real estate transactions by Indian HNIs in Switzerland and Portugal.
Portugal is one of the most sought-after nations in Western Europe for real estate investment. Investors can buy real estate anywhere in the country for €500,000 to be eligible for the Portugal Golden Visa program. A further compelling feature to real estate investors is the reduced €350,000 minimum investment required for investments made in residential or commercial real estate rehabilitation projects.
The tax department through this action is targeting undisclosed foreign assets and income held and generated abroad. The taxman has asked HNIs for more disclosures on foreign real estate assets held by HNIs through these notices and surveys, an action conducted under Section 133(A) and Section 133(6) of the Income Tax Act.
Recent investigations have uncovered several real estate transactions in Switzerland and Portugal. The tax department has found several interesting trends in these surveys and investigations. First, HNIs find that properties in foreign countries are significantly cheaper than similar properties in India.
Second, an influx of multinational companies into India has led to old business houses selling their stakes and amassing large sums of money, leading to wealth generation. Third, given that these HNIs have substantial funds, they find foreign investment opportunities more attractive than those available in India.
Experts say that historically, HNIs purchased assets abroad through offshore trusts and at times through multiple intermediary companies, which were largely opaque structures. However, with the global implementation of Ultimate Beneficial Ownership (UBO) rules and multiple financial leaks, such as the HSBC, Panama, and Paradise Papers, maintaining wealth in foreign financial assets has become challenging.
Thus, HNIs were considering investing in real estate abroad as a safer bet. India's focus on uncovering real estate transactions by its citizens in various jurisdictions is part of the tax enforcement strategy.
Frequently Asked Questions
What is the Portugal Golden Visa program?
The Portugal Golden Visa program allows investors to buy real estate in Portugal for €500,000 to be eligible for residency.
What is the minimum investment required for real estate rehabilitation projects in Portugal?
The minimum investment required for real estate rehabilitation projects in Portugal is €350,000.
What is the Income Tax department targeting through its action?
The Income Tax department is targeting undisclosed foreign assets and income held and generated abroad.
What are the trends found by the tax department in its surveys and investigations?
The tax department has found that properties in foreign countries are significantly cheaper than similar properties in India, and that HNIs find foreign investment opportunities more attractive than those available in India.
Why are HNIs considering investing in real estate abroad?
HNIs are considering investing in real estate abroad as a safer bet due to the global implementation of Ultimate Beneficial Ownership (UBO) rules and multiple financial leaks.
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